There are many benefits to HRAs (health reimbursement arrangements), including saving you money, time and stress! These tax-advantaged tools are customizable and save your business from the rising costs associated with group plan premiums. Are you interested in learning more or ready to make a switch? Let’s start by answering a question you probably have, “How do I start an HRA?”
How do I start an HRA?
1. If you currently offer a group plan and want to switch to an HRA, start by communicating with your employees. Change of any kind can be stressful, especially for long-time employees who have enjoyed their traditional group plan for years. Explaining HRAs and their benefits will help smooth the transition. Equip your employees with as much information as possible as early as possible to understand this new model of benefits and how these changes will affect them. Most likely, they haven't heard of it before but avoiding any surprises will help them welcome their new benefit.
2. It's also important to remind them that once the group plan is cancelled, they'll have a 60 day Special Enrollment Period to choose a new insurance plan on the individual market. If they wait any longer, they'll have to wait until open enrollment to choose another plan, and will be left with a scarcer selection of options that meet the requirements (like faith-based plans or short term plans).
Next, choose your HRA.
The two main types of HRA are the qualified small employer HRA and the individual coverage HRA. Take Command Health can help you know which one might work best for your business, but here are some things to consider.
Company size: QSEHRA is capped at 50 employees; ICHRA can be used in the smallest business (your nanny!) to the largest and those in between.
How much do you want to offer? QSEHRAs have a maximum annual allowance of $5,250 for employees with individual insurance plans ($437.50/mo) and $10,600 for employees with married and family insurance plans ($883.33/mo). No maximum limits with ICHRAs means employers can fully reimburse healthcare costs if they choose. You can vary the amounts you offer based on certain class information (like hourly vs. salary, remote workers, seasonal workers, etc) and further by criteria like age and family size. ICHRA allows for greater variety across classes while QSEHRA does not.
Do your employees have insurance? Employees need to secure their own insurance to participate in each HRA, but the requirements are slightly different. For QSEHRA, the health insurance must meet Minimum Essential Coverage which can be insurance purchased from the marketplace, a spouse's plan, a parent's plan, Medicare, Tricare, or Cobra.
ICHRA plan integration is more limiting; insurance must be purchased from the individual market or Medicare Part A +B or Part C; spouse's plans and Medi-share don't integrate with ICHRA.
Which employees qualify? QSEHRA is available to all full time employees. Part time employees can participate but you must offer the HRA on the same terms.
ICHRA classes allow for greater flexibility, however the terms must be the same within each class.
Do you have a group plan in place? Do you want to keep it? If yes, QSEHRA is not for you. Employees cannot participate in both a group plan and the HRA. However, this restriction does not apply to life insurance and disability. You can offer some employees ICHRA and some a group plan, however not within the same class.
Let’s get started!
Is an ICHRA right for your business? Here are the next steps for you.
Is the QSEHRA a better fit? We’ve got you covered, too.
If all of this sounds great, but you’d rather let someone else do the heavy lifting for you, here’s what to look for in a health insurance reimbursement administrator.
- Handle compliance, notifications, and reporting.
- Support your employees
- Support business owners